Budget plan could take bigger bite than expected

President Bush's proposed farm spending cuts could be far more costly for U.S. row crop producers than expected. A National Cotton Council analysis says they would make almost one-half of the U.S. cotton crop ineligible for marketing loans.

When the president announced his spending proposals for agriculture, they included lowering the payment limit for individuals to $250,000, eliminating the three-entity rule, basing marketing loans on historical production, and reducing crop and dairy direct payments by 5 percent.

Some accounts said the administration wanted to reduce the amount of crop that could be placed in the CCC loan or for LDPs by 15 percent. But those reports didn't give the whole story.

What reporters should have underscored was the line in the above paragraph about “basing marketing loans on historical production.” That's because the administration wants to limit the amount of crop a farmer can place in the loan to 85 percent of his payment yield.

For years, farmers have complained about having their program yields frozen at 1985 levels. To this day, growers who have increased their yields to 1,200 to 1,400 pounds of cotton per acre, for example, are still receiving payments on their 800-pound average from the 1980s.

“With U.S. average yields for cotton reaching 835 pounds per acre in 2004 and the average direct payment yield limited to 604 pounds per acre, only 52 percent of cotton produced in 2004 would have been eligible for the marketing loan,” according to the NCC. “A 48-percent reduction just in marketing loan gains in 2004 would have reduced cotton farm income by over $850 million dollars.”

USDA says its proposals would produce savings of $587 million in CCC outlays in 2006.

Asked about the difference in the numbers at USDA's Agricultural Outlook Forum on Feb. 24, Agriculture Secretary Mike Johanns declined to discuss the issue, referring the questioner to the USDA's chief economist, Keith Collins.

Collins agreed that up to 50 percent of some growers' production might not be eligible for CCC loans under the proposal, but attributed it to 2004's unusually high cotton yields. “In earlier years, the difference would not have been as great because yields were lower.”

The NCC also says the administration's proposed elimination of the three-entity rule would have an impact on much smaller farming operations than it might have anticipated.

“A California farm with 650 acres of cotton would hit the maximum in years such as 2004,” the paper said. “In the Southeast, Mid-South, and Southwest, growers with 800 to 1,000 acres of cotton would hit the maximum in payments.”

In one speech at the Outlook Forum, Farm Bureau economist Bob Young made light of rhetoric that seems to imply that the “family farm” is one that has five cows, six horses and a dozen chickens.

Anyone who says a 650-acre California farm or 800-acre operation in the Mid-South or Southeast isn't a family farm needs to spend some time out in the back 40.